Intesa is the latest financial services organization to choose Bloomberg's IFRS 9 Solely Payments of Principal and Interest (SPPI) data to determine how securities should be classified under the new accounting standard. Accounting and reporting departments can use Bloomberg's IFRS 9 SPPI data to systematically classify securities and conclude whether they pass or fail the SPPI test.

IFRS 9 will replace the existing IAS 39 accounting standard that prescribes how financial organizations should classify and value financial instruments on a current and ongoing basis. The new guidelines are designed to bring greater transparency and consistency to financial instrument accounting practices when they take effect in January 2018. The guidelines also necessitate more descriptive security-level data to reach an informed conclusion about how they should be classified and valued.

“The IFRS 9 SPPI requirements present a tremendous challenge because they require a data-intensive review of investment and loan portfolios to determine how securities should be treated,” said Chris Casey, Global Head of Regulatory and Reference Data at Bloomberg. “To comply with confidence, organizations need high-quality instrument data and a comprehensive methodology that allows them to accurately and defensibly perform this analysis on an ongoing basis.”

Nicola Torresani Head of Debt Pricing and Analysis at Intesa Sanpaolo said, “Using Bloomberg’s IFRS 9 SPPI in our accounting process will help us classify portfolio securities accurately and consistently across our organization. We also expect it will save us time and resources required to evaluate how our investments should be treated under the new standard. Bloomberg delivers high-quality data in a form we can readily use to assess the impact of the new rules on our accounting, reporting and risk management processes. We feel confident in the analysis performed by Bloomberg’s product and the methodology that drives it.”

The new IFRS 9 classification and measurement model requires an assessment of whether a financial asset’s contractual cashflows are solely payments of principal and interest, or SPPI. This SPPI test is done to identify whether an instrument has non-basic features and is presented at fair value, instead of using the effective interest method.

Making this determination on an instrument-by-instrument basis requires tremendous manual effort, as the prospectuses and legal documents for each financial asset must be reviewed individually and thoroughly to identify potentially non-SPPI features or cashflows. In order to properly assess and conclude the SPPI test, and the resulting classification and measurement of an investment portfolio, IFRS filers need to assess SPPI characteristics at a security level on a large scale. This analysis requires a large amount of descriptive data and the ability to organize this data in logical rule sets.

Bloomberg’s IFRS 9 SPPI data automates the process of performing the SPPI test and was developed in collaboration with a number of key industry stakeholders to deliver an industry standard SPPI classification.